CEO Pay Components and Aggressive Non-GAAP Earnings Disclosure

We examine the relation between CEO pay components and aggressive non-GAAP earnings disclosures using CEO pay components as proxies for managers’ short- versus long-term focus. Specifically, we explore the extent to which short-term bonus plan payouts and long-term incentive plan payouts are associated with: (1) Managers’ propensity to exclude expense items in excess of those excluded by equity analysts; and, (2) The magnitude of those incremental exclusions. We find that long-term incentive plan payouts are negatively associated with the likelihood and magnitude of aggressive non-GAAP exclusions. Our results are consistent with managers reporting non-GAAP information less aggressively when they are more focused on long-term, rather than short-term, value.

Information Content of Earnings Announcements Around IFRS Adoption and a Simultaneous Change in Press Release Disclosure in Italy

This study examines the effect of a security regulation that occurs simultaneously with International Financial Reporting Standards (IFRS) adoption on the information content of earnings announcements in Italy. To identify the effect of this regulation, we use a treatment and a control sample of IFRS countries that vary in the adoption of the security regulation, but are similar along a set of accounting and institutional dimensions (Italy versus France, Belgium, and Portugal). We find that the increase in information content of earnings announcements is more pronounced in Italy (treatment sample). Further, we analyze non-earnings disclosures using 2106 earnings announcements and find that the inclusion of IFRS-based detailed financial statements in earnings announcements contributes to the increased informativeness of IFRS earnings announcements. Our results provide support to the notion that regulatory changes concurrent with IFRS adoption are necessary to yield capital-market benefits.

Earnings management and the floatation structure: empirical evidence from Polish IPOs

Research background: Firms use discretionary accounting choices to manage earnings disclosures around the time of certain types of corporate events. The initial public offering particularly provides an opportunity to earnings management because of the significant information asymmetry between investors and issuers at the time of the offering. Purpose of the article: The main aim of the study is to empirically investigate the links between the earnings management and the portions of primary and secondary shares sold in IPO. Methods: In order to investigate whether the earnings management influences the issue of new shares and the sale of secondary shares I use Tobit and logit regressions, where discre-tionary accruals are the proxy for earnings management. Findings & Value added: Using a sample of 221 firms from Warsaw Stock Exchange between 2005 and 2015 I do not find evidence that the increase of pre-IPO discretionary accruals positively affects the sale of primary shares in the IPO, but the analysis has revealed that the deliberate conservative reporting limits the probability of the new shares issuance. In turn, the sale of secondary shares by the original shareholders in IPO is more likely in companies using a conservative earnings management. Furthermore, negative discretionary accruals increase the portion of secondary shares sold in the IPO.